Sequester may boost utility rates

This year’s federal sequester and government shutdown may force city utility rates to increase, according to a presentation to Sanford City Council.

Sanford Finance Director Beth Kelly presented an overview of the potential impact on the city during the council’s Law and Finance Committee meeting Wednesday.

The city issued $52.8 million in revenue bonds in 2010 for the wastewater treatment plant and all of the city’s previous utility debt — with $18 million of those issued as tax-exempt bonds with a low interest rate and $34.6 million issued in taxable bonds.

For each interest payment the city makes, it receives a federal rebate of 35 percent on Build America bonds and 45 percent on Recovery Economic Development bonds, Kelly said.

The city received these federal rebates based on the interest of the loans, she said, adding the sequester has lowered the federal interest rate, thus lowering the amount of funds the city receives back from the government.

“However, with the decrease in the projected bond rebates, that source of revenue will not be available from the federal government,” Kelly said in a memo to council members. “The burden will ultimately rest with the rate payers.”

These rates include water and sewer, Kelly said.

The city expected to receive a little more than $16 million in federal subsidy during the life of the loan for 25 years. These reductions will continue through fiscal year 2021, unless Congress changes the law.

In other matters, Council considered:

• A budget ordinance to appropriate $70,000 to the Sanford Police Department from drug forfeitures.

• A resolution certifying and declaring the results of the city’s $14.5 million bond referendums — which include installing sidewalks, creating a public park with interactive water elements, expanding the Endor Iron Furnance Greenway and streetscape improvements to downtown Sanford and Jonesboro — which were approved during the Sept. 10 primary.